More Mortgage Loans May Qualify for Refinancing

The Government released a statement that more homeowners with high LTV mortgage loans could soon be eligible for refinancing under the Obama administration’s plan to stem foreclosures.  According to a Bloomberg, the government is thinking about how to expand the existing foreclosure prevention initiatives to help homeowners who are more deeply underwater on their mortgages than the current program allows.  Millions of homeowners have lost their home equity with the housing crisis hindering loan to value levels significantly.

Right now, homeowners with mortgage loans guaranteed by FHA, Freddie Mac or Fannie Mae – and who meet various other criteria – can qualify for the government’s Making Home Affordable plan as long as their loan is equal to 105 % or less of their property’s value.  The program has already helped tens of thousands of borrowers refinance into new home loans with reduced monthly mortgage payments. And now, even more people could qualify.  “We’re actively considering how to structure a refinance program that makes sense over 105%,” James Lockhart, directory of the Federal Housing Finance Agency, told Bloomberg.

Recently, rising mortgage rates have become a potential roadblock to the program’s success, he added. The most recent figures from the Mortgage Bankers Association show that refinancing activity fell by nearly one-quarter (23 %) in the week ended June 12.   The proportion of mortgage applications to refinance home loans declined to 54.1 % from 59.4 % one week earlier.  Despite the fact that average rate for a 30-year, fixed rate mortgage decreased slightly to 5.5 %, it could not match the record-low rates seen in April.   “Higher mortgage rates will keep re-fi activity under pressure,” economist Tom Porcelli of RBC Capital Markets told Bloomberg.